CCSBE 24 th Annual Conference Ronald K. Mitchell University of Victoria Brock Smith University of Victoria J. Robert Mitchell Indiana University Eric A. Morse University of Western Ontario Transacting decisions and cognitive differences: Implications for the US-Canada softwood lumber dispute
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CCSBE 24th Annual Conference
Ronald K. Mitchell University of Victoria
Brock Smith
University of Victoria
J. Robert Mitchell Indiana University
Eric A. Morse
University of Western Ontario
Transacting decisions and cognitive differences: Implications for the US-Canada softwood lumber dispute
TRANSACTING DECISIONS AND COGNITIVE DIFFERENCES:
IMPLICATIONS FOR THE US-CANADA SOFTWOOD LUMBER DISPUTE This study explores the cognitive antecedents of the propensity to transact— a
leading indicator of the national stock of venture formation capability and a potentially important element in proceeding toward the resolution of the present softwood lumber dispute. ANCOVA and MANOVA analysis of data from a cross-sectional sample of 417 respondents finds evidence that Arrangements, Willingness, and Ability Scripts are related to the Propensity to Transact within countries, but that differences exist between the countries in the level and content of Arrangements and Ability Scripts. Public policy and theory-building implications for the study of decisions to transact (or to resume transacting) using the cognition perspective are discussed.
The Softwood Lumber dispute has proven to be the most important trade conflict between
Canada and the USA in terms of trade volumes, complexity, procedures, politicization and duration
and poses a threat to the smooth operation of the NAFTA trade agreement (Gagne, 1999). Inherent in
trade agreements is the structural imperative to include a dispute resolution mechanism (DRM)—
strong countries seeking a DRM that only exhorts, and weak countries seeking one that binds strong
and weak alike—that in NAFTA appears to be poorly suited to resolving difficulties relating to
subsidies (Reisman & Wiedman, 1995: 5). Confirming this assessment are results from both the
binational panel and the extraordinary challenge committee, which have both divided along national
lines (Gastle & Castel, 1995: 823). This leads us to wonder whether there is a nation-based approach
to transacting that affects economic relationships that affects decisions about transacting, since it is
well known that disputes arising from some basis in fact usually remain unresolved for personal/
cognitive reasons such as the attitudes and stance of the parties (Fisher & Ury, 1981).
The cognitive perspective in business research is receiving increased attention within the
literature. First, business cognitions have been shown to vary systematically (McGrath & MacMillan,
findings suggest a preliminary model that relates the business arrangements, willingness, and ability
scripts to likely economic results (venture expertise and subsequently, economic development). These
findings suggest that entrepreneurs appear and form ventures (Bull & Willard, 1993) based upon the
presence of appropriate venture scripts, and that an explanation for the success of some founder CEOs
but not others (Willard et al., 1992) might be found in expertise-based business theory. An expert
script explanation might therefore be useful in effecting an understanding of deeper commonalties
among the research findings of the various so-called competitive streams in the field. Our findings
point to the additional research needed to further explore the manner in which the business expertise
construct does reconcile the economic, psychological, and strategy-based streams in business research.
Implications for international business theory. Within international business research, new
theoretical frameworks are needed that “might help to organize and clarify the seemingly disparate
mass of empirical results” about key outcomes (McDougall & Oviatt, 1997: 302). In this article, we
expand the emerging cognitive perspective of business by: showing similarities in the new venture
arrangements, willingness, and ability scripts of entrepreneurs across cultures and by identifying some
of the specific differences within cultures.
These results show support for a cognitive perspective of business that explains the propensity
to transact across borders (McDougall & Oviatt, 1997: 293) using information processing constructs.
Further, the results suggest the existence of shared meaning in a cross-cultural venturing community,
which would facilitate international venturing and global start-ups (Oviatt & McDougall, 1995). This
suggests that the multitude of apparently heterogeneous phenomena that have in the past been thought
to affect the venturing intentions and outcomes, may form the elements of a coherent cognitive model
across countries that still illuminates and acknowledges differences in cognitive models within
countries. Researchers who wish to further organize and clarify empirical results in international
business research should carefully consider transaction cognition constructs and research as the source
of potentially unifying theory. International business research is also advanced by the creation of
measures that allow the operationalization of cross-cultural cognitive models of venture formation
(e.g., Busenitz & Lau, 1996) and facilitate larger sample studies that may be more able to capture the
range of variance in independent variables (Freeman, 1986).
In prior business and entrepreneurship research, the three more general cognitive processes
identified in the expert information processing literature (arrangements, willingness, and ability
scripts) have been included in intention-based, planned behavior models of the business event, albeit
under different labels (Krueger & Carsrud, 1993; Shapero, 1975; Shapero & Giglierano, 1982): (1)
cognitions related to the feasibility of the venture, (2) cognitions related to the propensity to act, and
(3) cognitions related to venture desirability (Krueger & Carsrud, 1993: 5). Leddo & Abelson (1986:
121) generalize these three processes for any type of expertise and suggest that they occur in a
cognitive sequence in the mind of an individual: with arrangements (script “entry”) scripts occurring
before willingness-ability (script “doing”) scripts. Thus, our extension and refinement of the Busenitz
and Lau (1996) model employs expert information processing theory to attain compliance with the
“total situation” requirement of social cognition theory, thereby suggesting a modification of the model
wherein the “social context” and “personal variables” constructs ought now to be included within the
overall cognition construct. This produces a modified model that retains venture outcomes as
consequent to cognition, leaving only cultural values as an antecedent construct, and—through
parsimony—suggesting a further step toward operationalization.
Conclusion
In conclusion, this research has added to both the business and the information processing
literatures focused on the composition of cross-country transaction cognitions. Further, it contributes
to our understanding about the likely quantity and quality of business in NAFTA countries—especially
as it bears on the most important trade relationship: that of trade in softwood lumber. This
investigation is timely since individuals, firms, and governments affected by the relatively new
NAFTA trading bloc are intently focused on the formative transacting process and can benefit from an
awareness of similarities and differences in new venture cognitions across member countries.
Specifically, better-designed, and as indicated from our study, more contextually responsive dispute
resolution mechanisms (Reisman & Wiedman, 1995), appear to be necessary.
As perhaps an even more reliable leading indicator than new venture formations themselves,
the assessment of the decisions to transact in a country offers evidence about the reservoir of business
talent within that country, as well as evidence suggesting likely differences in the quantity and quality
of that talent. A deeper understanding of these differences is also important to individuals who engage
in economic activity in different countries because there is a need to know which settings truly require
similar skills, and which do not (Peterson et al., 1995: 430). Although this research is exploratory, we
believe the results will make these stakeholders more aware of similarities and differences in
transaction cognitions, which may advance the collective economic interests of the NAFTA countries
(Hill, 1997; Hisrich et al., 1996).
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TABLE 1 HYPOTHESIS TESTS
A. Hypothesis 1 - ANCOVA C. Hypothesis 2 – Hierarchical Regression MS F p. All CAN MEX USA Covariates 654 93.4 .00 Age (Base model) .56*** .64*** .32*** .63***
Age 1269.0 181.0 .000 Country 100.9 14.4 .000 Cognition Model Arrangements .24*** .28*** .25** .21*** Main Effects 148.2 21.2 .00 Willingness .11** .03 .16a .14** Arrangements 145.2 20.7 .000 Ability .23*** .18** .17a .21*** Willingness 30.2 4.3 .014 Age .46*** .54*** .28** .48*** Ability 105.7 15.1 .000
Note. Model R2 = .51; Age R2 = .62; Country R2= .06 Note. Standardized Beta Coefficients reported; * p.<.05; ** p.<.01 Arrangements = Arrangements Scripts, etc. *** p.<.001; a p<.10; at least one of the country models significantly differs, at the .01 level, from the all inclusive model, based on Chow’s test (Q=6.67). Dummy coding of B. Hypothesis 2 – MANOVA country effects found a significant difference in the beta coefficients for Willingness Scripts between the models. Multivariate F Univariate F’s Wilkes Lambda p. F p. Country Effect .945 .000 Arrangements 3.69 .026 Willingness 2.12 .120 Ability 8.88 .000
TABLE 2
POST-HOC TESTS
A. Block Effects B. Full Model Stepwise
Canada Mexico USA Canada Mexico USA ∆R2 B p. ∆R2 B p. ∆R2 B p. B p. B p. B p. Age (Base) .41** .64 .000 .10 .32 .001 .39** .63 .000 .42 .000 .25 .004 .45 .000 Arrangements Scripts .16*** .16*** .15*** Resource Possession .42 .000 .36 .000 .36 .000 .41 .000 .31 .006 .28 .000 Protectable Idea .06 .351 .15 .102 .12 .015 .09 .055 Venture Network .05 .418 -.03 .757 .07 .171 Venture Specific Skills -.01 .898 -.05 .588 -.11 .034 -.12 .011 (Age) .44 .000 .23 .019 .49 .000 Willingness Scripts .02 .06a .06**